Correlation Between Select International and Financial Industries

Can any of the company-specific risk be diversified away by investing in both Select International and Financial Industries at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Select International and Financial Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Select International Equity and Financial Industries Fund, you can compare the effects of market volatilities on Select International and Financial Industries and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Select International with a short position of Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select International and Financial Industries.

Diversification Opportunities for Select International and Financial Industries

0.5

Correlation Coefficient

Select International  Financial Industries

Very weak diversification

The 3 months correlation between Select and Financial is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Select International Equity and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries and Select International is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Select International Equity are associated (or correlated) with Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Select International i.e., Select International and Financial Industries go up and down completely randomly.

Pair Corralation between Select International and Financial Industries

Assuming the 90 days horizon Select International Equity is expected to generate 0.82 times more return on investment than Financial Industries. However, Select International Equity is 1.22 times less risky than Financial Industries. It trades about 0.15 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.07 per unit of risk. If you would invest  1,151  in Select International Equity on May 22, 2025 and sell it today you would earn a total of  73.00  from holding Select International Equity or generate 6.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Select International Equity  vs.  Financial Industries Fund

Select International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Select International Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Select International may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Financial Industries

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Industries Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Financial Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Select International and Financial Industries

The main advantage of trading using opposite Select International and Financial Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select International position performs unexpectedly, Financial Industries can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Financial Industries will offset losses from the drop in Financial Industries' long position.

The idea behind Select International Equity and Financial Industries Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.